When the U.S. price level increases, we would expect a:
A) movement downward along the aggregate demand curve.
B) movement up along the aggregate demand curve.
C) shift to the right of the aggregate demand curve.
D) shift to the left of the aggregate demand curve.

Question

Quizplus · Accepted Answer

An increase in the U.S. price level would lead to higher inflation and a decrease in the purchasing power of dollars. This would cause a movement up along the aggregate demand curve as consumers spend more money to maintain their standard of living. A shift to the left would occur if there was a decrease in aggregate demand due to a decrease in consumer confidence or other factors.